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| Nokia News 2023; Image credit: pexels |
In light of a 20% sales drop in the July to September period, Nokia, the Finnish telecommunications giant, has announced its intention to shed between 9,000 and 14,000 jobs by the end of 2026. The primary driver behind this strategic decision is the dwindling demand for 5G equipment, especially in markets like North America. The company, which currently employs 86,000 individuals across the globe, has been reducing its workforce substantially since 2015.
Nokia is aiming to achieve cost savings in the range of €800 million to €1.2 billion (approximately £695 million to £1 billion) by 2026. The economic slowdown, marked by high inflation and interest rates, has led to reduced spending among its clientele.
Pekka Lundmark, the company's CEO, emphasized the need for significant investments in networks with enhanced capabilities, driven by advancements in cloud computing and AI. Nevertheless, given the uncertain recovery timeline of the market, Nokia is taking decisive action to minimize costs, with plans to reduce expenses by €400 million in 2024 and €300 million in 2025.
Mr. Lundmark also noted that despite the ongoing uncertainty, Nokia anticipates an improvement in its network businesses in the current quarter. The company did not disclose the specific locations of the job cuts or whether employees in the UK would be affected. These reductions were described as a "difficult business decision" but deemed necessary to adapt to market uncertainty and safeguard long-term profitability and competitiveness. Nokia has committed to supporting affected employees and is commencing consultations on the initial round of reductions.
The final decisions regarding the timing and specifics of the job cuts will be made with careful consideration and will hinge on the evolution of end-market demand, according to a company spokesperson.
Nokia's Shift from Handsets to Telecom Equipment
Once the world's leading handset manufacturer, Nokia failed to anticipate the surge in popularity of internet-enabled touchscreen phones like the iPhone and Galaxy series, eventually losing its top position to competitors. The company subsequently sold its handset business to Microsoft, a move that the software giant later wrote off. Nokia shifted its focus to telecommunications equipment, specializing in software and hardware used in telecoms infrastructure, including antennas, base stations, and cloud technology for phone calls and internet usage.
In 2020, Nokia capitalized on Huawei's exclusion from the UK's 5G networks by becoming the largest equipment provider to BT. However, manufacturers of 5G equipment have faced challenges as US and EU operators curtailed spending. Both Nokia and its Swedish rival, Ericsson, attempted to compensate for this downturn with increased sales to India, but the sluggish pace of 5G rollout there has hindered progress. Ericsson also reported a decline in sales this week, and the company foresees ongoing uncertainty impacting its business through 2024.
Tech Industry Struggles Amid Economic Headwinds
The telecommunications industry, along with other tech companies, has faced setbacks as customers, both individuals and businesses, have cut back on spending due to factors such as inflation and higher interest rates. This has resulted in workforce reductions in tech firms around the world over the past two years. Despite these challenges, tech professionals remain in demand, as 80% of large tech employees who lost their jobs managed to secure new employment within three months, according to job posting firm Zip Recruiter.